Competition Commission consider ZCI share sale

A story in today’s Post confirms that Zambia Competition Commission (ZCC) has received an application from the parties involved for an authorisation to transfer shares from ZCI to Vedanta (see previous entries mentioning ZCI, especially 17 Jan 2008, for much more information on this issue). Competition Commission director of mergers and acquisition Thula Kaira said it was mandatory for the two companies to seek ZCC authorisation to carry out such a large transaction. He added that a thorough independent assessment was yet to be carried out to ascertain the suitability of the transaction: “At the moment it is too early to say we have allowed the transaction or not but since they have applied, an independent assessment team will need to study the proposal before we can make a decision.”

ZCI, which is listed on the Johannesburg Stock Exchange, issued a statement: “Vedanta has accepted the bank’s valuation of our 24.8 per cent stake in KCM that is valued at US $ 213.15 million and the call option process has accordingly being finalised and in terms of the provisions of the call option deed. Vedanta has indicated that it intends to effect payment of the valuation price to ZCI by no later than 20 February 2008, where after ZCI would instruct KCM to effect transfer of the shares to Vedanta… It will also determine the nature of such amended focus, or whether a portion of the ZCI’s assets be distributed to shareholders by way of dividend or share buy-back and thereafter continue business as an investment or operating entity should the assets remaining after distribution/buy-back allow for a viable business case,” stated ZCI.

If the transaction goes ahead without blocking action from the Competition Commission or Zambian Government, which has previously expressed its opposition to Vedanta taking such a large share of the company, Vedanta will take a 75.8 per cent shares of Zambia’s largest copper mines. ZCI stated that it would soon present shareholders with their proposals for the future of the company that would determine whether the company should wind up operations and its assets distributed to shareholders, or whether it should continue as an investment or operating entity. When ZCI was established it included a mechanism, the Copperbelt Development Foundation, to compensate former employees and promote development for local residents and communities. The organization appears to have done almost nothing during the years of its existence. Some difficult questions face the Zambian Government, Anglo America, Vedanta, and the international aid donors that were involved in establishing CDF as a sweetener on the Anglo-American’s pull-out from the Zambian mining sector.